FOREX-Euro helped by report China will buy Portugal’s debt

* Euro gets lift from report China will buy Portguese debt

* Euro hovers near all time low vs Swiss franc

* Rising stocks, commodities keep Aussie well-bid

(Recasts, adds quote, details)

By Anirban Nag

LONDON, Dec 22 (BestGrowthStock) – The euro gained against the
dollar and recovered from all-time lows against the Swiss franc
on Wednesday, boosted by a news report that China was ready to
buy significant amounts of Portuguese sovereign debt.

The Jornal de Negocios daily reported China is looking to
buy between 4 billion euros ($5.26 billion) and 5 billion euros
of Portuguese sovereign debt to help the country ward off
pressure in debt markets, though it gave no details of its
sources. [ID:nLDE6BL0MW].

China’s central bank declined to comment on the report which
said the deal reached between the two governments will lead to
China buying Portuguese debt in auctions or in the secondary
markets during the first quarter of 2011.

“This is a small positive for the euro,” said Valentin
Marinov, currency strategist at CitiFX.

“The net supply in the first quarter is projected to reach 6
billion euros. If that is confirmed and China is willing to buy
4-5 billion euros it will reduce some of the funding pressures
on Portugal.”

The euro was up 0.5 percent against the dollar at $1.3160
(EUR=: ), having hit a session high of $1.3181 on the news and
well above its near three-week trough of $1.3073 set on Tuesday.

Despite the bounce, investors are nervous about the single
currency’s prospects given the euro zone’s debt problems.

Latest blows this week to the 16-member club’s struggling,
heavily-indebted economies have came from Moody’s, which warned
it might cut Portugal’s rating, and Fitch, which said the same
about Greece. [ID:nTOPNEWS]

“The rating agencies are not saying anything new but the
question is how does this market want to take it,” said Geoffrey
Yu, currency strategist at UBS. “Clearly these are terrible
market conditions and the speed at which the euro is losing
ground against the Swiss franc is a bit disconcerting.”

The euro (EURCHF=: ) was down 0.1 percent at 1.2525 Swiss
francs, having fallen to an all time low of 1.2493 on trading
platform EBS. It took out option barriers at 1.2500 francs
en-route to a fresh all-time lows, traders said.

It also fared badly against the high-yielding Australian
dollar, (EURAUD=R: ), falling to a low just under A$1.3100.

With liquidity drying up ahead of the Christmas holiday,
Citi’s Marinov expected the euro to underperform against riskier
currencies like the Australian dollar and the Scandinavian
currencies.

AUSSIE UNDERPINNED BY RISK TRADES

The Australian currency (AUD-D4: ) was underpinned by further
gains in equities and commodities, suggesting improving risk
appetite as analysts revise up forecasts for growth in 2011.

On Tuesday the S&P 500 (.SPX: ) finally recovered all the
ground lost since the Lehman debacle, while the CRB commodities
index (.CRB: ) reached a two-year peak.

“In the currency and European bond markets risk aversion is
prevailing. But in many other markets we’ve seen risk-taking,”
said Tohru Sasaki, chief strategist at JPMorgan Chase Bank.

“This may indicate that the world’s financial markets are
becoming bubbly, driven by excess liquidity. Asset prices could
rise further if European problems stabilise, which would
probably mean a rise in cross/yen as well as a fall in
dollar/yen.”

The dollar has fallen almost 10 yen since the end of 2009.
On Wednesday it was at 83.47 yen, down 0.3 percent for the day,
with a significant drop in U.S. yields in recent session
weighing on the pair.

In the near term dealers expect range-bound trade, with
one-month implied volatility on dollar/yen falling below 9.5
percent (JPY1MO=: ), the lowest since late 2007.

The dollar index (Read more about the global trade. ) (.DXY: ) (=USD: ) slipped 0.4 percent to 80.42,
which marks a gain of more than 3 percent for the year.

The United States is due to release their latest estimates
of gross domestic product (GDP) for the third quarter. U.S.
growth is expected to be revised up to an annualised 2.8
percent, from 2.5 percent previously.
(Additional reporting by Hideyuki Sano in Tokyo; Editing by
Patrick Graham)

FOREX-Euro helped by report China will buy Portugal’s debt